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Graduate Degrees and Low-Wage Work

Underemployment is a phenomenon in the labour market that doesn’t get a lot of attention. That’s partly because the term “underemployment” can mean a couple of different things. One definition of “underemployment” is part-time workers who would prefer to be working full-time, or who are actively seeking full-time work while working part-time. Those situations aren’t always captured by measures that simply count the numbers of part-time workers, because those data don’t look at workers’ reasons why they are working part-time.

Another definition of “underemployment” is workers that have higher qualifications than the requirements of the job they’re employed in. This is also referred to as “overqualification”. And there’s a new study with some fascinating data about underemployment or overqualification among people with graduate degrees.

The study, published by the Centre for the Study of Living Standards in Ottawa, looks at Canadian data on low-wage employment between 1997 and 2014. “Low-wage” is defined ias “any hourly earnings that fall below two-thirds of median hourly wages for full-time workers aged 20 to 64 years, where full-time is defined as 35 hours [a week] or more” (p. 5).

The study acknowledges that “employees with a master’s or a doctorate degree had the lowest incidence of low-wage jobs in every year, at 7.7 per cent in 1997 and 12.4 per cent in 2014” (p. 8). It’s reasonable to assume that someone with a graduate degree would likely be underemployed, or overqualified, if they were working in a low-wage job. Earning a graduate degree does, apparently, make it less likely that a worker will be in that wage category. But – as shown in the table below – it’s also noticeable that the percentage of workers with graduate degrees in low-wage jobs, and thus presumably underemployed, is steadily increasing.

The study doesn’t look at whether these workers earned their graduate degrees in Canada or somewhere else. That’s an important caveat, because there is a persistent problem in the Canadian labour market with underemployment of immigrants – primarily because Canadian employers may not perceive degrees from non-Canadian post-secondary institutions as being equivalent to degrees from Canadian schools. So the numbers of low-wage workers with graduate degrees might go up if more immigrants with non-Canadian graduate degrees are coming to Canada.

It’s also important to keep in mind that within any group of workers with common characteristics, there will be variations in pay. An individual worker’s rate of pay is affected by many variables, such as their age, their experience, their training (other than their education), their employer’s ability to pay, and the average wage rates in their geographic region. So education alone is not going to explain why a worker gets paid a certain amount.

Nevertheless, the increasing numbers of low-wage Canadians with graduate degrees is worrying for a couple of reasons. One is the significant amount of time and money that most students must put into achieving a graduate degree. If more workers with graduate degrees are ending up in low-wage jobs, that may mean those workers are not getting a reasonable financial return on their educational investment. That’s particularly troubling when many graduate degree programs market themselves to potential students as a pathway to higher earnings or better jobs.

Another concern is that, although the study doesn’t distinguish between workers with master’s degrees and workers with Ph.D. degrees, its results may point to a particular problem for Ph.D. graduates. Traditionally, Ph.D. graduates have looked for work as university faculty members. This is less true than it used to be – as shown by the increased attention to “alt-ac” careers – but studies show that the majority of Ph.D. students still plan to become university professors.

However, take a look at these data from Statistics Canada which were just released this month. The table below shows the dollar amounts that universities and colleges spend on faculty salaries; the data are available for as far back as 2000/01, but for space reasons I’ve chosen to only show the data for the past ten years.

(source: CANSIM table 477-0059; numbers are dollars X 1,000)

The total expenditures at Canadian universities and colleges over this period increased from $22,575,643,000 to $33,830,846,000. But, as the table shows, there hasn’t been much change at all in the percentage of expenditures on academic salaries for those positions in the “academic ranks” category. This is the category that includes most of the permanent faculty positions in universities and colleges. The relatively constant percentage of salary expenditures in this category (around 75% of total academic salaries) suggests that there also hasn’t been a significant change in the numbers of jobs in this category.

There are no comprehensive Canadian data on changes across time in the number of permanent faculty positions at Canadian post-secondary institutions. So it’s difficult to prove conclusively that more Ph.D.s are ending up in low-wage jobs because there aren’t more jobs for them as university professors, but it’s certainly reasonable to think that might be a factor in why this is happening.

But the continued increase in the number of workers with graduate degrees in low-paying jobs is still something to be concerned about. It means potentially damaging long-term financial problems for those workers. And it also means that society is likely missing out on the contributions that could result from optimizing the use of those workers’ training, expertise and knowledge.